DCIT 24(3), MUMBAI vs. ARVIND JAIN, MUMBAI

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ITA 4969/MUM/2014Status: DisposedITAT Mumbai20 April 2023AY 2005-064 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal observed that the assessee failed to submit supporting evidence before the AO, CIT(A), or the Tribunal. Therefore, the issue was remanded back to the AO for detailed verification of the impugned transaction.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of an addition made on account of long-term capital gains from share transactions. The Assessing Officer had treated the gains as unexplained cash credit, relying on an investigation report and SEBI findings that the shares were penny stocks and the assessee was a beneficiary of accommodation entries.

What were the issues?

Whether the CIT(A) was justified in deleting the addition made on account of long-term capital gains from penny stocks without sufficient corroborative evidence from the assessee. Whether the matter requires further investigation by the Assessing Officer due to the assessee's failure to discharge the primary onus.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

For Respondent: Shri Manoj Kumar Sinha
Pronounced: 20.04.2023

O R D E R Per Kavitha Rajagopal, J M:

This appeal has been filed by the Revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short)

2005-06.

2.

The Revenue has challenged this appeal on various grounds where the ld. CIT(A) has deleted the impugned addition made by the Assessing Officer (A.O. for short) on long term capital gain (LTCG for short) as unexplained cash credit u/s. 68 of the Act.

3.

Since there was no representation on behalf of the assessee inspite of several opportunities, we hereby proceed to dispose of this appeal by hearing the learned

(A.Y. 2005-06) ACIT/DCIT vs. Shri Arvind Jain Departmental Representative (ld. DR for short) for the Revenue and on perusal of the materials available on record.

4.

The brief facts are that the assessee is a proprietor of M/s. Infra Constructions which is engaged in the business of Civil Contractor mostly with Mumbai Municipal Corporation. The assessee filed his return of income dated 31.10.2005, declaring total income of Rs.37,81,071/-. The assessee’s case was selected for scrutiny and the assessment order dated 30.03.2007 was passed by the A.O. by determining the total income at Rs.40,97,152/-. The assessee’s case was reopened for the reason that the assessee had declared LTCG of Rs.55,11,494/- and had claimed the same as exempt income. As per the information from DDIT(Investigation), the assessee is said to have shown sale proceeds of shares in the scrips of Rama Krishna Fincap Ltd. as LTCG which according to the Investigation Report was a penny stock and that the assessee was one of the beneficiary of accommodation entries. The SEBI’s order dated 09.11.2009 is also corroborated with the fact that the scrip of Rama Krishnan Ltd. through broker M/s.

Basant Parewal & Co. was said to be penny stock.

5.

The assessment order u/s. 143(3) r.w.s. 147 of the Act dated 21.03.2013 was passed by the A.O. determining the total income at Rs.96,08,565/- by making an addition of Rs.55,11,494/- as unexplained cash credit u/s. 68 of the Act.

6.

The assessee was in appeal before the ld. CIT(A) as against the impugned order.

The ld. CIT(A) deleted the impugned addition on the ground that the A.O. did not have any material on record to conclude the transaction to be bogus and that the A.O. has failed to carry out any investigation and had merely relied on the report of ADIT(Inv.).

(A.Y. 2005-06) ACIT/DCIT vs. Shri Arvind Jain The ld. CIT(A) further held that the broker involved in the sale and purchase of the said share has not given any statement which is against the impugned transaction and that mere violation of bye laws of SEBI cannot be treated as bogus. The ld. CIT(A) relied on the decision of the Hon’ble Jharkhand High Court’s decision in the case of CIT vs. Arun Kumar Agarwal HUF 10 taxmann 205 where in case of no corroborative evidence, addition cannot be made as undisclosed income on the profit on sale of shares. The ld. CIT(A) deleted the said addition on these grounds.

7.

The Revenue is in appeal before us, challenging the order of the ld. CIT(A).

8.

We have heard the ld. DR and perused the materials available on record. It is observed that the Revenue has recalled the decision of the Tribunal dated 18.09.2017, which had deleted the impugned addition on the ground that the A.O. has failed to prove the said transaction as bogus and merely because the share broker involved in the impugned transaction had violated the SEBI Regulations, the same cannot be treated as bogus transaction. It is also observed that the Revenue has recalled the order on the ground that the ld. CIT(A) has not addressed the findings given by the SEBI for the purpose of adjudicating this issue. The ld. DR stated that the assessee has not made compliance before the ld. CIT(A) and hence not furnished any documentary evidence to support his claim. On perusal of the records, we are of the considered opinion that the assessee has failed to submit the evidence supporting his claim neither before the A.O. nor before the ld. CIT(A). The assessee has also failed to appear before us. We deem it fit and proper to remand this issue back to the file of the A.O. for the purpose of detailed verification on the impugned transaction made by the assessee through the broker M/s.

(A.Y. 2005-06) ACIT/DCIT vs. Shri Arvind Jain Basant Periwal & Co. Mere reliance on the fact that the said broker has not stated anything adverse to the assessee, is not sufficient to hold the transaction to be genuine.

The assessee is directed to discharge the primary onus casted upon him before the A.O. by furnishing the relevant documentary evidences in support of his claim without any further delay. The A.O. is directed to decide the issue on merits after giving opportunity of hearing to the assessee. Hence, this issue is remanded back to the file of the A.O.

9.

In the result, the appeal filed by the Revenue is allowed for statistical purpose.

Order pronounced in the open court on 20.04.2023

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